Noted for January 18, 2013

John Quiggin:Utopia and climate change: "Economic development and technological progress provide the only real hope of lifting billions of people out of poverty and destitution…. Yet the living standards of the developed world have been built on cheap energy from carbon-based fossil fuels. If everyone in the world used energy as Americans or even Europeans do, it would be impossible to restrict climate change to even four degrees of warming. For those of us who seek a better life for everybody, the question of how much our environment can withstand is crucial. If current First World living standards can’t safely be extended to the rest of the world, the future holds either environmental catastrophe or an indefinite continuation of the age-old struggle between rich and poor. Of course, it might hold both."

Ryan Avent:The euro crisis: Mario Draghi's premature canonisation: "I find it shocking how readily we all seem to be accepting the European Central Bank's inaction on euro-zone economic weakness. Some perspective is in order. Real euro-area output is at roughly the level of the end of 2006 and it is declining. The euro-area economy hasn't grown since the third quarter of 2011. Total employment is below the level first attained in the second quarter of 2006 and it is declining. The unemployment rate is of course at a record high 11.8%. And inflation—both core and headline—was virtually nil in the second half of 2012. That's simply a dismal macroeconomic performance…. [T]he complacency on the macro situation (and on the broader process of institutional reform, for that matter) are just astounding."

Noah Smith:The End of Labor: How to Protect Workers From the Rise of Robots: "For most of modern history, inequality has been a manageable problem. The reason is that no matter how unequal things get, most people are born with something valuable: the ability to work, to learn, and to earn money… two-thirds of the income of most rich nations has gone to pay salaries and wages for people who work…. But in the past ten years, something has changed. Labor's share of income has steadily declined…. [T]here is another, more sinister explanation for the change. In past times, technological change always augmented the abilities of human beings…. Recent technological advances in the area of computers and automation have begun to do some higher cognitive tasks…. Once human cognition is replaced, what else have we got?"

Rebecca Diamond:Diverging Location Choices by Skill: 1980-2000: "From 1980 to 2000, the substantial rise in the U.S. college-high school graduate wage gap coincided with an increase in geographic sorting as college graduates increasingly concentrated in high wage, high rent metropolitan areas, relative to lower skill workers…. The GMM estimates indicate that cross-city changes in demands for high and low skill labor were the underlying forces of the increase in geographic skill sorting…. My estimates show that low skill workers are less willing to pay high housing costs to live in high-amenity cities, leading them to elect more affordable, low-amenity cities. I Önd that the combined effects of changes in citiesíwages, rents, and endogenous amenities increased well-being inequality between high school and college graduates by a significantly larger amount than would be suggested by the increase in the college wage gap alone."

Paul Krugman:On the Non-equivalence of Greenhouse Gases and Entitlement Spending: "[C]an you make the analogy work in reverse, and say that liberals concerned about the future of the environment should be equally concerned about the long-run budget outlook? Tom Friedman recently made that argument…. [E]xplaining what’s wrong here helps make the broader point that we are spending far too much time worrying about long-term budget projections. So, let’s start with climate change. Serious people are and should be deeply worried, indeed horrified, by the lack of action…. [E]ach year we fail to act has more or less irreversible physical consequences…. So each year that we fail to act has a direct physical impact on the future. There’s also an investment aspect: each year that we fail to get the incentives right, people commit limited resources to the wrong technologies…. Now ask, what in the debate about “entitlements” corresponds at all to this kind of impact? Nothing."

Lawrence Mishel, John Schmitt, and Heidi Shierholz:Assessing the job polarization explanation of growing wage inequality: "This approach started with Autor, Katz, and Kearney (2006), and the most elaborated version has appeared in Acemoglu and Autor (2011 and 2012)…. Technological change has generated changes in the job structure and the need for greater skills and education but has not been responsible for growing wage inequality or the divergence of productivity and median real wage growth that has characterized the post-1979 period. We offer an explanation of these trends that does not rely on technological change as a factor, an explanation that highlights shifts in power in the labor market driven by policy changes."

Comments

John Quiggin:Utopia and climate change: "Economic development and technological progress provide the only real hope of lifting billions of people out of poverty and destitution…. Yet the living standards of the developed world have been built on cheap energy from carbon-based fossil fuels. If everyone in the world used energy as Americans or even Europeans do, it would be impossible to restrict climate change to even four degrees of warming. For those of us who seek a better life for everybody, the question of how much our environment can withstand is crucial. If current First World living standards can’t safely be extended to the rest of the world, the future holds either environmental catastrophe or an indefinite continuation of the age-old struggle between rich and poor. Of course, it might hold both."

Ryan Avent:The euro crisis: Mario Draghi's premature canonisation: "I find it shocking how readily we all seem to be accepting the European Central Bank's inaction on euro-zone economic weakness. Some perspective is in order. Real euro-area output is at roughly the level of the end of 2006 and it is declining. The euro-area economy hasn't grown since the third quarter of 2011. Total employment is below the level first attained in the second quarter of 2006 and it is declining. The unemployment rate is of course at a record high 11.8%. And inflation—both core and headline—was virtually nil in the second half of 2012. That's simply a dismal macroeconomic performance…. [T]he complacency on the macro situation (and on the broader process of institutional reform, for that matter) are just astounding."

Noah Smith:The End of Labor: How to Protect Workers From the Rise of Robots: "For most of modern history, inequality has been a manageable problem. The reason is that no matter how unequal things get, most people are born with something valuable: the ability to work, to learn, and to earn money… two-thirds of the income of most rich nations has gone to pay salaries and wages for people who work…. But in the past ten years, something has changed. Labor's share of income has steadily declined…. [T]here is another, more sinister explanation for the change. In past times, technological change always augmented the abilities of human beings…. Recent technological advances in the area of computers and automation have begun to do some higher cognitive tasks…. Once human cognition is replaced, what else have we got?"